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Sentiment Overview: Week Of November 20th, 2009 at Trader’s Narrative

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Here is the sentiment summary for the Thanksgiving holiday week of trading:

Sentiment Surveys
The AAII weekly survey of retail US investors shows they continue to return to complacency from the extremely pessimistic stance earlier this month. This week the bulls continue to rise, gaining 4% points to 43% while the bears decline 7% points to 32%. The bull ratio is 57% - in line with the long term average. For a chart, check previous link.

ChartCraft’s Investors Intelligence survey of newsletter editors also shows a similar return to complacency after a slight dip last week. There was a slight increase in bulls to 46.1% and a significant drop of bearishness to 21.3% - bringing the ratio back to 2:1 where it has hovered for the past few months.

The US public continues to be wary of equity investments. The Gallup Investor Optimism survey for October showed a slight erosion, back to September levels. This, despite the S&P 500 being about 10% higher than back then.

Gallup Index of Investor Optimism Nov 2009
Source: Gallup

Option Sentiment
The CBOE put call ratio (equity only) ratio continues to show a majority of call purchases as option traders ignore any real consideration of risk and reach to grab more gains. While the short term moving average of the put call ratio has recovered somewhat from the extreme low in mid October it is still quite low:

cboe equity only put call 10 day moving average Nov 2009

The ISE Sentiment index which targets retail option traders is showing about the same preponderance of bullishness. The 10 day moving average of the equity only ISE Sentiment closed the week at 187. That’s lower than last month’s ratio but it is still at elevated levels which have corresponded more to tops than bottoms in the past.

Magazine CoverBusiness week cover Nov 2009
This week’s magazine cover indicator comes courtesy of BusinessWeek and features a rampaging bull with the title caption: “The New Threat from Wall St.”

While the imagery represents the symbol reminiscent of the stock market, the accompanying article is about the impact that Wall St. is having on municipalities around the US. Rather than being a barometer for the stock market, it is an indication of the prevailing public mood against the excess of Wall Street investment banks.

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